What has happened?
The Swiss financial regulator has released a factsheet on cryptocurrencies, reminding market participants that even though Switzerland does not regulate the buying and selling of virtual currencies, other rules may apply.
What does this mean?
The Swiss Financial Markets Supervisory Authority (FINMA) told market players that intend to operate a blockchain-based business in Switzerland that they must first find out whether any licensing requirements apply under financial market law.
In its factsheet, FINMA said that Switzerland has no regulation on the buying and selling of cryptocurrencies or their use to pay for goods and services.
"In other words, no special approval is required for these activities," FINMA said.
However, since virtual currencies are based technology that often facilitates anonymity and cross-border transfers, this entails increased risks of money laundering and terrorism financing. As such, trading in them may will require permission from the regulator.
"In particular, providing custody wallet services (i.e. custody and payment services for virtual currencies) and operating trading platforms on which virtual currencies can be bought and sold fall under the AntiMoney Laundering Act."
Providers of such services therefore need to join a self-regulatory organisation or register with FINMA as a financial intermediary.
Other activities may also require a banking licence may and attract ongoing supervision by the regulator.
This would be the case, for example, for organisations that accept money "on a commercial basis" from clients and keep it in their own account.
Other blockchain-based applications may also require approval.
"Virtual currencies like Bitcoin are not the only application of blockchain technology, which also underpins the services provided by so-called 'colored coins' and 'smart contracts'. In these cases the provider must ascertain in advance whether approval is required under other financial market laws (e.g. the Stock Exchange Act or the Financial Market Infrastructure Act)."
The regulator also cautioned against some of the risks associated with virtual currencies, such as volatility or uncertainties regarding the issuer and said that it would investigate and punish any breaches.
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